Onto Innovation Inc.

and welcome to the On2Innovation first quarter earnings release conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sidney Ho. Please go ahead.

Thank you, Rachel, and good afternoon, everyone. On2Innovation issued its 2025 first quarter financial results this afternoon shortly after the market closed. If you did not receive a copy of the release, please refer to the company's website where a copy of the release is posted. Joining us on the call today are Michael Paczynski, Chief Executive Officer, and Mark Slytherin, Chief Financial Officer. I'd like to remind you that the statements made by management on this call will contain forward-looking statements within the meaning of the federal securities law. Those statements are subject to a range of changes, risks, and uncertainties that can cause actual results to vary materially. For more information regarding the risk factors that may impact onto innovation's results, I would encourage you to review our earnings release and our SEC filings. Onto Innovation does not undertake the obligation to update these forward-looking statements in light of new information or future events. Today's discussion of financial results will be presented on a non-GAAP financial basis unless otherwise specified. As a reminder, a detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings release. Let me turn the call over to our CEO, Mike Lisinski. Mike? Thank you, Sydney.

Good afternoon, everyone, and thank you for joining us on our call today. Onto Innovation set another revenue record for the quarter, delivering $267 million in revenue. This growth was driven by expansions in both the advanced nodes and packaging to support growth of AI compute engines and increasing investments in cloud and enterprise servers, both seemingly undampened by market concerns over tariffs. However, the announced tariffs by the Trump administration are impacting onto innovation somewhat uniquely because nearly all of our products are manufactured in the United States. Naturally, this negatively impacts our incoming costs due to the Trump administration's tariff policies, as well as the cost to export our tools from the potential of retaliatory tariffs imposed by other countries. In response... we're accelerating existing strategic programs to improve business continuity and resiliency by installing manufacturing capability in Asia. Due to the incredible cooperation between our team and Asian manufacturing partners, we expect shipments to begin in the second half of 2025 and to have roughly half our product volume capable of being shipped out of these new facilities by early 2026. We expect to realize margin improvements from this effort in the second half of 2026. Once completed, we'll be significantly more competitive while providing greater levels of certainty to our global customers. Now, let's review our first quarter business highlights, starting with the advanced nodes. Our metrology business is benefiting from increased process control capital intensity of gate all around and memory, as well as the performance and cost of ownership advantages that our optical metrology suite is delivering to our customers. This has led to record quarters for our newest products, Iris Films Metrology and Impulse 5 Integrated Metrology, while Atlas OCD Metrology nearly surpassed the quarterly record set in Q1 of 2022 before we were impacted by U.S. trade policy with China. As we anticipated, revenue from our specialty device and advanced packaging markets declined from the record fourth quarter. Recently, a leader in 2.5D packaging for AI commented that the long-term outlook of AI has improved as new AI models are expected to lower barriers to entry and drive greater adoption of compute engines. Similarly, HBM device makers are preparing for higher memory content as well as the transition to HBM4 next year. These expanding markets are also driving new tool requirements including greater precision, sensitivity, and throughput in order to produce devices with higher yields and lower costs. In response to these new requirements, during the last two quarters, we doubled the performance of our inspection tools, but this did not address 100% of the new needs. So together with our customer, we began accelerating an existing program for a new inspection platform capable of providing significantly better sensitivity and higher performance. Wafer demos will start this quarter, and we expect to ship evaluation units later this year. Though disappointing in the short term, in the long term, we believe this new technology may also open up opportunities in the front-end macro inspection market we have not previously competed. Now, turning from 2D interconnects to 3D interconnects, We're making steady progress moving through the rigorous process qualification of our 3DI technology. In the first quarter, 3DI bump metrology was selected by two more OSATs for applications where better throughput and repeatability was required. We also shipped additional evaluation units to two leading memory manufacturers in the quarter. Besides bump metrology, the other challenge in future 3D packaging is void detection for hybrid bonding applications. Our echo scan system, which is a unique technology being developed for detection of yield-killing voids and bonding interconnects without the need to immerse samples in liquid, has demonstrated capability at a Tier 1 customer site on R&D test samples. We are now starting tests on production test samples where variation materials and multiple layers will further stress the technology. Currently, no other technology can find voids in these structures at this resolution, which we believe will be critical for yield control and HVM of hybrid bonding devices. Further along the adoption curve, we have delivered many of our subsurface defect inspection tools to reduce sources of yield loss from cracks and voids in packaging for 2.5D and emerging hybrid bonding applications. We're also adding customers outside of packaging to support similar needs and MEMS and power applications. And now I'll turn the call over to Mark to review our financial highlights and provide second quarter guidance.